USDA Expands Access to Capital for Rural Businesses

Contact: Tammi Schone
(605) 352-1102

The U.S. Department of Agriculture (USDA) Rural Development unveiled new rules to expand access to capital for rural businesses. The changes, published in the Federal Register, make it easier for rural businesses to qualify for loans under USDA’s Business & Industry (B&I) Guaranteed Loan Program. This new regulation will go into effect August 2, 2016.

“Access to capital is one of the most important needs for businesses,” Rikkers said. “USDA is partnering with the Treasury Department and other agencies to ensure that rural businesses have the resources they need to prosper and grow. The regulatory changes I am announcing today will help businesses expand their operations and create jobs.”

"The B&I Program has proven to be a valuable mechanism, helping numerous businesses gain access to affordable business capital and thereby, improving the overall economic climate in rural South Dakota,” said USDA Rural Development Acting State Director Bruce Jones. 

These changes allow businesses to use the New Markets Tax Credit as a form of equity. For the first time, employees of a business are also allowed to qualify for loan guarantees to purchase stock in a business by forming an Employee Stock Ownership Plan or worker cooperative.
Other improvements include:

• New loan application scoring criteria, including priority for loans to businesses that will create quality jobs, such as those with healthcare benefits;
• Reduced paperwork requirements to refinance loans;
• Strengthened eligibility criteria for non-regulated lenders (such as privately-owned finance companies) to participate in the B&I Program; and
• Expanded loan eligibility, including in urban areas, for projects that process, distribute, aggregate, store, and/or market locally or regionally produced foods.

The stock ownership provisions are modeled after rural cooperative businesses. Co-ops have been economic development partners with USDA for decades. A January 2016 USDA report indicated that cooperatives earned $6.5 billion in net income and generated $246.7 billion in total revenue in 2014.

For a complete overview of the new rules, see page 35984 of the June 3, 2016 Federal Register.

In South Dakota, USDA awarded 46 B&I Program loan guarantees totaling $82.2 million between 2009 and 2015 to help rural businesses create or retain jobs. One of these loans – for $244,000 helped a local family open a new restaurant in Belle Fourche which offered new jobs and a new business for a small rural community.  Another B&I loan for $10 million from 2013 helped Atlantis, LLC build a 145-unit hotel in the Box Elder area.

By providing access to capital and opening up new markets, USDA is helping American businesses compete and succeed locally, nationwide, and in the tough arena of international trade. For more information, visit Chapter 6 of https://medium.com/usda-results.

To learn more about the Business & Industry program for South Dakota, contact Dana Kleinsasser at (605) 352-1142 or email her at dana.kleinsasser@sd.usda.gov; Tim Potts at (605) 342-0301, Extension 4 or email him at tim.potts@sd.usda.gov; or Cayla Hilbrands at (605) 352-1142 or email her at cayla.hilbrands@sd.usda.gov.
 
Since 2009, USDA Rural Development (#USDARD) has invested $11 billion to start or expand 103,000 rural businesses; helped 1.1 million rural residents buy homes; funded nearly 7,000 community facilities, such as schools, public safety, and healthcare facilities; financed 185,000 miles of electric transmission and distribution lines; and helped bring high-speed Internet access to nearly 6 million rural residents and businesses. To learn more, visit www.usda.gov/results.

Last Modified: 06/20/2016